On July 4, 2025, President Trump signed into law the One Big Beautiful Bill, a sweeping package that reshapes the tax landscape — and, more quietly but no less significantly, rewrites the rules of healthcare and employee benefits.
While much of the media coverage has focused on tax cuts and new savings vehicles, buried within the legislation are dramatic Medicaid reforms that could send financial shockwaves through provider networks and employer-sponsored health plans.
Cuts to Medicaid funding. Stricter eligibility rules. New reverification requirements. Combined with updates to rules on HSAs, FSAs, and telehealth, these changes are forcing employers, hospitals, and benefits leaders to confront a very different healthcare environment in 2026 and beyond.
Why Medicaid Reform Isn’t Just a Public Sector Concern
Medicaid covers more than 85 million Americans and is the single largest payer in the U.S. healthcare system. It funds hospitals, behavioral health services, maternity care, long-term care — and helps stabilize provider networks in rural and underserved areas. So, when Medicaid’s structure changes, the ripple effects reach everyone — including employers.
Here’s how:
1. Employer Plans Will Inherit More of the Cost Burden
With the OBBB rolling back reimbursement rates and narrowing eligibility, hospitals and physicians are expected to try to recoup revenue losses by charging more to commercial payers. That means:
- Higher unit costs for inpatient stays, outpatient services, and specialty care
- Increased leverage by dominant health systems in network negotiations
- Potential gaps in network access if providers exit in response to financial stress
- Insurance carriers managing both Medicaid and commercial lines of business are likely to increase their rates, perhaps sharply. Even for relatively healthy groups, this could result in premium increases that don’t align with claims experience.
Add to that the administrative strain of more frequent midyear enrollment changes — and it’s easy to see why we’re expecting a volatile 2026 renewal season.
2. Enrollment Patterns Are About to Get Wild
The OBBB introduces several major changes that will disrupt coverage eligibility for millions. It does so by:
- Narrowing eligibility for Medicaid and ACA premium tax credits
- Eliminating caps on repayment of excess tax credits
- Adding strict reverification requirements beginning in 2028
The most disruptive effect may come from redeterminations. As Americans lose public coverage due to these new rules, employers could see a surge in midyear enrollments, COBRA events, and changes in ACA affordability status.
Many lower-wage employees — especially in hospitality, caregiving, and retail — may fall back on employer plans they previously waived. That means:
- Increased enrollment in base-level plans, raising claims exposure
- Greater risk of adverse selection
- More HR workload from off-cycle enrollment and appeals
New Benefit Rules Add to the Complexity
As detailed in a recent Mahoney Group Compliance Bulletin, the OBBB also includes several updates to employee benefit programs. Some are welcome, others more complex — and all will require action.
Telehealth: The law permanently restores the pandemic-era rule allowing HDHPs to cover telehealth visits pre-deductible. This change is retroactive to Jan. 1, 2025 — meaning some employers may choose to reimburse out-of-pocket costs incurred earlier this year.
HSAs & DPC: The law expands HSA eligibility to include all Bronze and Catastrophic Exchange plans, regardless of deductible limits. It also allows participation alongside compliant Direct Primary Care (DPC) models, with DPC fees reimbursable from the HSA up to defined thresholds.
Dependent Care FSAs: The annual cap rises to $7,500 for 2026 — the first increase since 1986. Employers will need to update plan documents, open enrollment materials, and test for nondiscrimination.
Trump Accounts: New tax-advantaged savings vehicles for children under 18, with a federal “birth bonus” and optional employer contributions. While optional, these may appeal to younger or growing families.
ACA Tax Credit Restrictions: Individuals enrolling via certain special enrollment periods will no longer qualify for subsidies. Those who do qualify must now repay any overpayments in full.
What Employers Should Do Now
The OBBB’s Medicaid reforms are set to go into effect late next year. Here are the steps we recommend you take now:
- Model different enrollment scenarios based on potential Medicaid disenrollment
- Review your claims and network data for early signs of cost shifting
- Strengthen stop-loss and evaluate direct contracting or reference-based pricing options
- Update benefit communications, particularly around FSAs, HSAs, and telehealth
- Train your teams on new compliance obligations and how they intersect with your existing ERISA responsibilities
The One Big Beautiful Bill isn’t just tax reform. It’s a significant realignment of how healthcare is financed and delivered — and employers are now firmly in the blast radius.
The Mahoney Group, based in Chandler, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. For more information, visit our website or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.